Manage the risk of your surplus cash

When investing your company’s surplus cash, you need to decide what types of returns you would like to earn for your business, bearing in mind your investment time horizon and your risk culture. Here are some ideas for managing risk:
Before choosing an investment, assess your comfort with market fluctuations and calculate how well your business can handle those fluctuations.
Review your previous investment experiences to gain a better understanding of your comfort level when dealing with volatility.
Consider what percentage of your portfolio is held personally and by your business in order to calculate if you need to better balance risk between the two.
Identify the external risks that may affect your business. External risks include economic downturns, new or emerging competitors, new technologies, changes in consumer demand, tightening of government regulations, etc.
Assess how well your business can withstand unexpected external changes and how they would affect your investment strategies.
Save money for unexpected expenses by putting aside enough surplus cash in a low risk short-term investment product.
It’s important to ensure that your investments are properly diversified. Diversify by term, by dividing your money into short/medium & long-term holdings. Protect your funds from currency fluctuations. Mix your long-term investments (i.e. cash, fixed income, equities). Have exposure to different markets (i.e. local and international) to mitigate your risk if one market declines.
Consider the tax implications of your various types of investments.
Remember: The principal goal of a business owner/manager is to manage assets effectively, not to own them (that’s why it makes sense to consider selling unused or under-utilized assets).  
 
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